Beware of Ponzi Schemes

Beware of Ponzi Schemes..!!!!

I was travelling in the train from Mumbai to Ujjain. In the train compartment, I was happily travelling with the fellow traveler. Although we never met before but got very close to each other during conversation. We all were 4 persons including me. All were between 30-40 year age group. One person was businessman and other 2 were doing job in MNC. When they knew about my profession about financial adviser then the subject of our discussion turned towards investment and I was told that all of them had recently invested in PACL (Pearls Agrotech Corporation Ltd), s deposit scheme. They were very happy after investing in this scheme as the scheme were promising very high return than bank FD or a plot subject to availability. One of very close friends of that businessman had advised and forcibly done the investment. MNC employee had invested as their boss had invested in that scheme.

I cautioned them to invest in such type of schemes but they were very confident. After all scheme was suggested by their very close friends. They all were very happy and carefree about investment and told me that many people had invested in this scheme and even you should also participate in this scheme. I have refused their advice and warned them about these types of schemes in future. After reaching destination we had exchange mobile no. and said goodbye to each other.

Before few days I have received a call one of them and he had told me that you were saying right the PACL was banned by court to collect further deposit from the investors. Many times we all get trapped in such type of schemes after emotional advice from our relative, neighbor, co-worker or companies agents.  

Ponzi schemes are schemes that makes the tall promises of high return which is many time more than bank FD return on your investments and invest in opaque and unregulated instruments. Often these types of scheme are not on the regulatory radar.

I again advise all of you please do not invest in any scheme only on the basis of anyone’s advice, do your own homework before investing after all it is your hard earned money and you have to decide where it should be parked. If anyone offers you an assured high return product that offers more than simple bank fix deposits, be alert.

Never trust on oral promises read all term and condition and know about instrument where your money would be invested and how the return would be generated. Check the schemes rating and do not follow the herd mentality. Herd mentality means many times you invest in the same investment of your best friends. Often they told you their friends got great return and forced you to invest. Listen to all advice but invest if it makes sense. Do not fall for those schemes that seem too good to be true.

If you want more information regarding investment or you have any other query about investment feel free to ask us.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

Beware from MLM and fraud comanies with greed of high return

Beware Investor from MLM and fraud companies

I have said many times in past that keep away from MLM ( Multilevel Marketing Companies) or Ponzi Schemes and those companies agent who promise huge return in short period. Today, I have read Indian express newspaper and sharing some fact and figure with you about these companies.

 The government yesterday said it has found 87 companies across the country to have disappeared after raising funds totalling Rs 342 crore through public issues. In these companies most of established in Gujrat state. Besides, 87 other companies are also being probed by the government agencies for duping the general public through illegal Multi-Level Marketing (MLM) or Ponzi schemes and West Bengal tops this list with as many as 73 such entities.

The market regulator Sebi has also detected as many as 669 companies to have duped the investors of Rs 7,435 crore through illegal collective investment schemes, Corporate Affairs Minister Mr Sachin Pilot informed the Lok Sabha.

The entities are classified as 'vanishing companies' if they cease to file their balance sheets and other documents after raising capital and the whereabouts of their offices or directors become untraceable.

In the Ponzi or MLM investments, the companies generally raise the money from general public and ask each investor to lure others into these schemes with a promise of huge returns. However, the operators disappear after some time, leaving the gullible investors in lurch.

In reply to another query on vanishing companies, the Corporate Minister said that the government had initially identified 238 such entities that have raised money through public issues. Out of these, 119 companies were put under a 'watch list', as they began filing their balance sheets and other documents with the Registrar of Companies or stock exchanges. Out of the remaining 119 companies, 32 companies are presently under liquidation, while 87 others have been classified as 'vanishing companies', Pilot said.

As per the state-wise list, 26 companies out of the total 87 such untraceable firms were registered in Gujarat. Gujarat is followed by Andhra Pradesh (13), Tamil Nadu (10), Maharashtra (9), Delhi (5), West Bengal (5), Madhya Pradesh (5), and Uttar Pradesh (4) for such companies. Regions such as Chandigarh, Karnataka have two such firms each, while one company each are from Orissa and Punjab. FIR has been filed against all the 87 companies and prosecutions has been filed against 85 of them.

The state-wise list of the companies indulging illegal Ponzi schemes is topped by West Bengal (73), followed by Delhi and Tamil Nadu with five each such companies. Besides, two such companies were found in Rajasthan and one each in Karnataka and Uttar Pradesh.

"Out of these companies, 75 have been wound up and the money refunded to the investors. 552 companies were prosecuted (and) convictions have been secured in 124 cases," Pilot said.

The Minister further said that various regulatory agencies are also taking steps to sensitise the public against such schemes, while newspaper editors are also sensitised to exercise caution in accepting advertisements pertaining to acceptance of deposits of un-incorporated bodies.

While Sebi is also conducting various investor awareness programs in this regard, the RBI is in process of undertaking a comprehensive campaign aimed at alerting the public against falling prey to Ponzi schemes and other monetary malpractices.

If you have some queries about investment and financial plan please feel free to ask.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com